The S&P 500 gained 23% in value last year. This pushed the two-year performance to 53%, marking the best period of growth for the index since the 66% gain for 1997-1998. When I look at this year, top analysts from Wall Street have released their forecasts. There are plenty of interesting points for investors to note down.
A clear theme in expectations
Let’s start with the numbers. The most optimistic forecast comes from Oppenheimer, with the team targeting a year-end S&P 500 level of 7,100 points. If this was correct, it would be almost a 20% rally from the current price.
Most of the major US banks are bunched around the 6,500 mark, with this the forecast for Citi, JP Morgan, Goldman Sachs and Morgan Stanley. This still represents just under a 10% gain from the latest closing price.
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Bank of America has a rather ominous figure of 6,666 points written. I’ll leave that for everyone to make up their own minds on what that could indicate for the events of the coming year!
None of the major contributors from the data I have are predicting the S&P 500 to fall. The lowest target for 2025 is 6,000 points from Cantor Fitzgerald.
As a disclaimer, these forecasts from the major banks and brokers are subjective. They’re based on research, of course, but ultimately there’s nothing to say for certain the index will hit any of the targets set by these predictions.
Helping to drive the rally
It’s really interesting to consider that Wall Street expects further gains from the US stock market. The index will be driven by key sectors. Many expect that artificial intelligence (AI) can support a continued rally, as more widespread adoption helps to improve profitability.
One company that could help to lead this charge and may be worth further research is Broadcom (NASDAQ:AVGO). The firm’s in the S&P 500 and rocketed 121% higher over the past year. A good portion of this jump came towards the end of the year, as investors started to think it could be a viable chip-making alternative to the expensive ones from Nvidia.
More specifically, it could do well in 2025 as it specialises in making more bespoke custom chips. These Application-Specific Integrated Circuits (ASICs) are much more customisable than some of the Nvidia choices. This works well for companies with specific AI needs that are looking to invest here for 2025 onwards.
Of course, competition in this space is huge and will only continue to ramp up as other players try to take market share away from Nvidia.
A final point
Investors should be aware that the price-to-earnings ratio for the S&P 500’s 27.45, which is almost double the FTSE 100 by comparison. Yet even if something’s perceived to be expensive, it doesn’t mean that it can’t become more expensive, as the forecasts for this year indicate!
